U.S. GoldMining Aims For U.S. IPO Investment

Summary

• U.S. GoldMining Inc. has filed proposed terms for a $20 million IPO.
• The firm is seeking to explore the Whistler Project area of Alaska for mining gold.
• With the IPO, U.S. GoldMining Inc. seeks to obtain financing as a separate entity from parent firm GoldMining Inc.
• Given the highly speculative nature of the project and lack of business revenue, I'll pass on the U.S. GoldMining Inc. IPO, although it may attract day traders seeking volatility.
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A Quick Take On U.S. GoldMining Inc.

U.S. GoldMining Inc. (NYSEMKT:USGO) has filed to raise $20 million in an IPO of its units consisting of common stock and one warrant, according to an S-1 registration statement.

The firm is an exploration-stage mining firm focused on gold mining in the Whistler Project in Alaska.

USGO is a highly speculative stock and there is significant risk of failure to find or mine gold in a reasonable time frame or cost.

While the IPO may attract day traders seeking volatility, I'll pass on it.

U.S. GoldMining Overview

Vancouver, Canada-based U.S. GoldMining Inc. was founded as a subsidiary of GoldMining Inc. (GLDG), set up to exploit the Whistler Project, which is a gold-copper project in the Yentna Mining District of Alaska.

Management is headed by president and CEO Tim Smith, who has been with the firm since September 2022 and was previously Vice President Exploration for parent company GoldMining and Regional Director Generative Exploration, North America for Newmont Corporation.

The following map shows the Whistler Property in yellow on the left, to the northwest of Anchorage, and comprised 377 mining claims covering approximately 53,700 acres in total area:

Whistler Project Area Map (SEC)

As of November 30, 2022, U.S. GoldMining has booked fair market value investment of $3.8 million from investors, including parent firm GoldMining Inc.

The following table indicates a mineral resource estimate as prepared by Moose Mountain Technical Services as of September 22, 2022:

Mineral Resource Estimate (SEC)

U.S. GoldMining’s Market & Competition

According to a market research report by Resource Development Council, there were approximately 192 active placer mines in Alaska. In 2018, they produced a total of 60,690 ounces of gold with an estimated gross production value of $77 million.

Mining in Alaska requires a significant time investment during the permitting process.

"When a plan is put forward for permitting, a multi-year process, involving 11 federal and state government agencies, over 60 individual permit requirements, and multiple and ongoing opportunities for public input begins." (Source: Resource Development Council)

Major competitive or other industry participants include the following:

• Donlin Gold

• Kinross Gold

• Contango ORE

• NovaGold Resources

• Graphite One

• Others.

U.S. GoldMining Inc. Financial Performance

Below are relevant financial results derived from the firm’s registration statement:

Statement Of Operations (SEC)

As of November 30, 2022, U.S. GoldMining had $54,508 in cash and $1.5 million in total liabilities.

U.S. GoldMining Inc. IPO Details

U.S. GoldMining intends to raise $20 million in gross proceeds from an IPO of its units consisting of common stock and one warrant, offered at a proposed price of $10.00 per unit.

Each U.S. GoldMining Inc. warrant (USGOW) will be immediately exercisable for up to three years after the date of issuance, and the exercise price will be $13.00, assuming the IPO share price is $10.00.

No existing shareholders have indicated an interest in purchasing shares at the IPO price.

Assuming a successful IPO, the company’s enterprise value at IPO would approximate $103.5 million, excluding the effects of underwriter over-allotment options.

The float to outstanding shares ratio (excluding underwriter over-allotments) will be approximately 16.48%. A figure under 10% is generally considered a "low float" stock which can be subject to significant price volatility.

Management says it will use the net proceeds from the IPO as follows:

IPO Proposed Use Of Proceeds (SEC)

Management’s presentation of the company roadshow is available here until the IPO is completed.

Regarding outstanding legal proceedings, management says the firm is not a party to any proceeding that would have a material adverse impact on it.

The listed bookrunners of the IPO are H.C. Wainwright & Co., BMO Capital Markets and Laurentian Bank Securities.

Commentary About U.S. GoldMining’s IPO

USGO is seeking U.S. public capital market investment as it seeks to separate from parent firm GoldMining Inc. so it can raise funding for its exploration efforts.

The firm’s financials show no revenue and significant exploration and G&A expenses associated with its startup efforts.

The firm currently plans to pay no dividends to retain any future earnings for reinvestment back into its growth and working capital requirements.

The market opportunity for gold mining in Alaska is relatively large and the potential for substantial gold deposits in the Whistler Project is significant.

H.C. Wainwright & Co. is the lead underwriter and there is no data on IPOs led by the firm over the last 12-month period.

Risks to the company’s outlook as a public company include regulatory permitting risks, gold price volatility risks and mining discovery and extraction risks.

As for valuation expectations, management is asking investors to pay an Enterprise Value in excess of $100 million despite no revenue.

U.S. GoldMining Inc. stock is highly speculative and there is a significant risk of failure to find or mine gold in a reasonable time frame or cost.

Although the U.S. GoldMining Inc. IPO may attract day traders seeking volatility, I'll pass on it.

Expected IPO Pricing Date: March 14, 2023

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.